Worried your legal work could contribute to clients' criminal conduct? New ABA ethics opinion shares guidelines
Formal Opinion 513 centers on Model Rule 1.16(a) of the ABA Model Rules of Professional Conduct. The rule was amended in 2023 because some lawyers were unwittingly involved in clients’ criminal or fraudulent activity. (Image from Shutterstock)
What are lawyers’ duties to assess the facts and the circumstances of every client’s or potential client’s situation—to ensure that the representation does not contribute or further the client’s criminal or fraudulent activity? This question is addressed in a new ethics opinion from the ABA’s Standing Committee on Ethics and Professional Responsibility.
Formal Opinion 513, released Friday, centers on Model Rule 1.16(a) of the ABA Model Rules of Professional Conduct. The rule was amended in 2023 because some lawyers were unwittingly involved in clients’ criminal or fraudulent activity or failed to pay appropriate attention to helping clients in activities, such as money laundering and financing terrorist activities.
If a lawyer has “actual knowledge” that their services will further a client’s criminal or fraudulent activity, the lawyer must decline the representation, according to the opinion. Likewise, if the lawyer has knowledge that there is a high probability that their services will further client criminal or fraudulent activity, the lawyer’s conscious and deliberate choice not to inquire and assess further represents the “knowing assistance of criminal or fraudulent activity.”
Also, the opinion explains that the lawyer’s investigation must be “reasonable,” rather than “perfunctory.” The lawyer does not have to undertake a “dragnet-style operation” to uncover every single fact about a client, according to the opinion.
Lawyers do not have to resolve all doubts, according to the opinion.
“If some doubt remains even after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation as long as the lawyer concludes that doing so is unlikely to involve assisting or furthering a crime or fraud,” according to the opinion.
However, under some circumstances, the lawyer might have to ask follow-up questions of the client, ask for documents and check public sources of information. If the client does not provide such requested information, according to the opinion, the lawyer may have to decline or withdraw.
In a series of comments, the opinion notes that lawyers’ duties to assess the situation will vary, depending on the situation. Also, it explains that lawyers should follow “a risk-based approach,” which classifies potential risk as either high, medium-high, medium, medium-low or low.
Additionally, the opinion lists factors to consider in a risk assessment. That includes the lawyer’s experience with the client; the identities of people who get or deposit money into a client’s trust account; and relevant jurisdictions involved in the piece of business, with attention to whether the area is high risk for money laundering or terrorist financing.
Examples are included. For instance, if a client usually acquires local real estate with funding from a local bank and presents a new piece of business involving the creation of a multitier corporate structure formed in another state to acquire property in a third jurisdiction, that could trigger a lawyer’s need to make further inquiries and assessments, according to the opinion.
An Aug. 23 ABA press release is here.
